Sweden Monetary Policy

Sweden: Riksbank cuts repo rate to 1.00% in December

December 18, 2012

At its 18 December monetary policy meeting, the Central Bank (Riksbank) cut the repo rate by 25 basis points to 1.00%, in a move that was in line with market analysts' expectations. According to the Bank, the decision aims to "support the Swedish economy so that inflation rises towards the target of 2 per cent". Overall, the Bank has cut the repo rate by a cumulative 100 basis points since the beginning of the easing cycle in December 2011.

Riksbank stated that there are some signs of improvement in the United States and China. On the other hand, the Bank noted that the recession in the Euro area continues to affect the Swedish economy, weakening household consumption and investment.

Regarding price developments, Riksbank acknowledged that inflationary pressures remain subdued due to weak economic activity. Indeed, the Bank expects inflation to remain below its target of 2.0% in 2013. Moreover, Riksbank lowered its forecast for the average repo rate to 1.00% in 2013 and 1.50% in 2014 (previously forecasted: 1.20% and 1.70%, respectively).

The economic tendency indicator increased from a revised 113.4 in October (previously reported: 113.3) to 114.1 in November according to the National Institute of Economic Research (NIER), marking the eighth successive month above 110.0.

Industrial production rose a seasonally-adjusted 2.2% in September over the previous month according to Statistics Sweden (SCB), down from August’s revised 1.6% decline (previously reported: -1.7% mom).